Bitqyck ICO Operators Fined $10 Million to Settle SEC Charges

The Securities and Exchange Commission (SEC) has settled charges against the operators of Bitqyck Inc and online deals platform TradeBQ.com for selling digital tokens in initial coin offerings (ICOs).

Bitqyck was launched in early 2017 by co-founders Bruce Bise and Samuel Mendez. However, the agency says that Bitqyck and its founder sold two digital tokens, Bitqy and BitqyM, to US investors without registering their illegal $13 million securities offering.

The SEC claims that the offering ran afoul of securities laws because the vehicle being offered could be considered securities, and thus the principles should have registered with the SEC as broker-dealers.

The SEC further alleges the ICO operators raised the funding from over 13,000 investors, who received $4.5 million for referring new investors but ultimately lost nearly 65% of their investment in the Dallas-based company.

BitqyM claims that the funds would be used to finance its development of a Smart Contract Smart Contract A smart contract is a piece of software that automatically executes a pre-determined set of actions when a certain set of criteria or met. One of the key tenets of smart contracts is their ability to perform credible transactions without third parties and are self-executing, with their conditions written into the lines of code that form themAdditionally, these transactions are both trackable and irreversible. For example, a smart contract could be used to give royalty payouts to a musical artist A smart contract is a piece of software that automatically executes a pre-determined set of actions when a certain set of criteria or met. One of the key tenets of smart contracts is their ability to perform credible transactions without third parties and are self-executing, with their conditions written into the lines of code that form themAdditionally, these transactions are both trackable and irreversible. For example, a smart contract could be used to give royalty payouts to a musical artist Read this Term-denominated ecosystem where each token provides ownership in a cryptocurrency mining facility “powered by below-market rate electricity,” the SEC described.

Over $10 million in penalties

In addition to the fact that BitqyM’s two tokens are neither registered with the SEC nor qualified for an exemption to the registration requirements, the company did not have access to cheap power and never owned any mining facility.

The SEC orders impose financial penalties against the company and include undertakings to compensate harmed investors who purchased tokens in the illegal offerings. Without admitting or denying the allegations, Bitqyck, Bise, and Mendez agreed to pay civil penalties of $8.3 million, $890,254 and $850,022, respectively.

“Because digital investment assets represent a new and exciting technology, they can be very alluring, especially if investors believe they are getting in on the ground floor and will own part of the operations. We allege that the defendants took advantage of investors’ appetite for these investments and fraudulently raised millions of dollars by lying about their business,” said David Peavler, Director of the SEC’s Fort Worth Regional Office.

Since the crypto-boom, the SEC has periodically cracked down on a number of ICOs for fraudulent activity, while continues to warn investors of the potential perils of investing in the nascent sector. However, the regulator approved last month Blockstack, which is building a platform for decentralized apps, as the first ever startup to file an application with the SEC to sell its tokens, called Stacks, under the Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term A+ exemption.